via russell, but by ugh
ObWi regular and good buddy ugh posted this over on TiO. I thought it was quite good - thoughtful, relevant, important topic. I asked him if it was OK if I cross-posted it for him here. He was cool with that, so here ya go. NB: the "I" from here on out refers to ugh.
I've been at a conference the last several days and there was a kind of frightening discussion of the budgetary and tax outlook for the rest of the year.
1. The current budget authorization ends on 9/30/2012.
2. It now appears we may hit the debt ceiling in December.
3. On 12/31/2012, the 2001/2003/2010 individual rate cuts expire.
4. On the same date, the payroll tax cut expires.
5. There are several business tax breaks that expired at the end of last year (including things like the R&D credit) that have yet to be extended.
6. Many other provisions expire at the end of this year, including the AMT patch and the expansion of 100% depreciation.
7. Also at 12/31/12, the 1.2T sequestration kicks in as a result of the failure of the Super Committee.
Further, other than perhaps reaching an agreement on a continuing resolution for a few months near the end of December to avoid a government shutdown a little over a month before the Presidential election, no one seemed to expect any of these things to be resolved before the Presidential election. Thus, these will have to be addressed in a lame-duck session of Congress that will last around 5 weeks.
If they're not, then we'll see a massive tax increase combined with large cuts in federal government spending beginning 1/1/2013, along with the possibility of a default on the U.S. gov't's debt right around that time; all this with an economy that currently has an 8.3% unemployment rate (though improving). That scenario, it seems to me, would be economically devastating to the country.
But addressing all the above issues would likely be impossible in a lame-duck session due to lack of time. The only potential solution suggested was perhaps they could reach a deal to extend everything for X months to give the next Congress time to attempt to address these issues in a less rushed manner. One other suggestion was just to not have a lame duck session, let all the expiring tax provisions expire and sequestration kick in, and maybe then Congress could come to some sort of agreement on budgetary/entitlement/tax reform under the threat of destroying the economy.
If I had to guess, I'd say there would be some sort of short-term agreement to kick the can to the next Congress on most/all of these issues, but who knows. It's not going to be pretty.